The proposed law was "bereft of principle" and "manifestly unfair" in that it overturned the legal arrangements of businesses and gave each of those businesses a different taxation outcome depending on arbitrary circumstances, Sir Geoffrey said.

He was appearing on behalf of Ernst and Young before a select committee of MPs examining proposed changes to the Taxation Bill.

In May, Finance Minister Michael Cullen proposed that inbound tourism operators and some education organisations with foreign students be stopped from claiming gst refunds on overseas income back to 1986.

The Inland Revenue Department told some companies that gst could be refunded on some services provided to non-residents based outside New Zealand.

In 1999, the National government tightened the law to prevent future gst claims on that basis.

Dr Cullen told Parliament earlier this year the change was not a "retrospective tax grab" to cover up the budget blowout, as asserted by ACT NZ MP Rodney Hide. "I see no reason having charged gst and then collected that money they should then receive a windfall gain because of a court decision which nobody actually expected to occur in the first place."

Dr Cullen told MPs those businesses that had not charged gst would not have Inland Revenue now seeking to grab the tax back.

Sir Geoffrey said the fact that Parliament had already looked at the issue once and was now intending to overturn that again only made it more unfair for those affected.

Ernst and Young submitted that if MPs could not reject the proposal then they make the retrospective nature of the law shorter-term. -- NZPA

Supplied by New Zealand Press Association
 

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